Acting as a Financial Attorney- Can you make gifts from the Donor’s funds?
Many people have now planned for their future by completing a Power of Attorney (POA) for financial matters. This would be either an Enduring Power of Attorney, if it was completed prior to 1st October 2007, or a Lasting Power of Attorney, if completed after that date.
In some cases an attorney may be assisting with the administration of finances at the request of the donor of the power – perhaps because they physically find it hard to deal with matters. In those circumstances the donor could still decide to make gifts of assets or cash themselves, perhaps as part of Inheritance Tax (IHT) planning strategies. But what are the attorneys’ powers if the donor has lost the mental capacity to make decisions themselves?
Subject to any restrictions specified in such a POA, the attorney will only be able to make gifts on the donor’s behalf on ‘customary’ occasions, such as birthdays, Christmas or weddings. The size of the gift has to be reasonable, so if the donor had been in the habit a making a small cash gift to their grandchildren at Christmas, those gifts can usually continue.
If the donor of the power has sufficient assets to be liable for the payment of IHT after they pass away (the current threshold is £325,000) then the attorneys may also be able to make gifts utilising the annual exemption of £3,000.
Gifts of any larger amounts would have to be authorised by the Court of Protection, which does recognise that reducing IHT can be a valid reason for wanting to make a gift. The Court considers a number of factors before agreeing that a gift may be in the donor’s best interests, and will require information about the donor’s family and finances before reaching a decision. This is a complicated area and we recommend that you seek legal advice before making any such gifts. If an attorney is found to have made gifts without proper authority, they could have their appointment as attorney revoked by the Court, and there is a risk that they could be asked to pay back the money personally. In the most serious cases of fraud, the matter could be referred to the police.
Photo by Tax Credits 
